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Partnerships from Cannibals with Forks:

The Triple iottom line of 2 1st=CenturyBusiness


John Elkinjton

Editor’sNote: John Elkington’s new book, Cannibals with Forks: The Triple Bottom Line of 21st-
Century Business, has been hailed as “practical,compassionate and deeply informed, a brilliant
synthesis of his genius for cutting through the thicket of tough issues-in the world of business
and sustainability-and producing elegant solutions that can be applied today”(Paul Hawken).
We are pleased to have the opportunity to publish a selection from this award-winning book. In
this discussion of partnerships, Elkington explores how effective, long-term partnerships will be
crucialfor companies making the transition to sustainability and offers approaches and examples
of keen interest. Special thanks to Capstone Publishers, U.K.,for their gracious cooperation.

- _. .. __
Sustainability can be a 2 + 2 = 5 (or even pany, may seem common sense, but old
50) game. To achieve outstanding triple perceptions and prejudices die hard. Po-
bottom line performance, new types of eco- tential partners continue to feel profoundly
nomic, social, and environmental partner- misunderstood by those they should be
ship are needed. Long-standing enemies seeking to influence and engage. “I just
must shift from mutual subversion to new wish I could give people a pill so that they
forms of symbiosis. The resulting partner- could see the world the way we see it,” the
ships will help each partner perform tradi- chief environmental officer of a major cor-
tional tasks more efficiently, while provid- poration once confided. “Forget it!” I re-
ing a platform from which to reach towards plied. But the comment was an interesting
goals that none of the partners could hope window into at least one corporate soul.
to achieve on their own. Many business people-and many
Effective, long-term partnerships will campaigners-still see the clash between
be crucial during the sustain ability tran- companies and campaigners in terms of an
sition. Some will be between the public unending battle between the forces of good
and private sectors, some between compa- and evil, of light and darkness. Right and
nies, and some between companies and wrong, however, depend on where you are
groups campaigning for a broad range of standing and which way you are facing.
triple bottom line objectives. The focus in Consider the views of Jim-Bob Moffett, the
this article will largely be on environmen- larger-than-life American chairman of
tal partnerships, but we are also seeing the Freeport McMoRan-the company which
evolution of similar partnership ap- runs one of the world’s largest copper and
proaches in such areas as Third World de- gold mines in the mountains of Irian Jaya.’
velopment and human rights. Freeport McMoRan and RTZ, which
The idea of trying to develop partner- owns a stake in the mine, found them-
ships, both inside and outside the com- selves plunged into the X-ray environment

CCC 1088-1913/98/0801037-15
0 1998 John Wiley & Sons, Inc. ENVIRONMENTALQUALITYMANAGEMENT / Autumn 1998 / 37
I Revolution Focus Old paradigm ) New paradigm

5 Partnerships Subversion ) Symbiosis


1 . ___ ._

when a group of hostages were seized by of corporations being what it is, the 21st
members of the Free Papua Movement century will also produce abundant ex-
(OPM), as part of its independence amples of the corporate monkey trap in
struggle. The OPM see the mine, operated action. Some companies will escape
virtually as an extra-territorial part of empty-handed, some will work out ways of
America with the protection of the Indone- breaking the jar out of the earth, but more
sian military, as a symbol of the problems than a few will also be hammered senseless
they face. Worse, the local tribespeople- by their opponents.
in addition to having been driven off their
lands-complain that run-off from the WHY WORRY?: TOMORROWS CEOS ARE
mine is polluting rivers and that the re- GREEN
moval of forest cover is affecting the local Another reason for business to worry
climate. Paradoxically, the hostages in- is that the environmental agenda is way up
cluded students from Cambridge Univer- the list of priorities ofthe emerging genera-
sity who had been working with local tions of university graduates. “Europe’s
tribes to learn how they exploited nature graduates put care for the environment top
without destroying it. of their agendas,” according to The Euro-
The Freeport McMoRan response to p e a n Graduate Survey, which covered
environmental challenges can only be de- 16,000 final-year students in 56 universi-
scribed as robust. The scale of the pollu- ties, business, and engineering schools
tion, Jim-Bob Moffett retorted, “is equiva- across 14 countries3But, while 68 percent
lent to me pissing in the Arafura Sea.” He said they were prepared to pay the price of
told The Times that he was involved in “a a better environment, only 38 percent
new Cold War” with local and interna thought that the global picture would im-
tional campaigners. “This,” he said, “is not prove. These young people are also switch-
a job for us, it’s a religion.” All of which ing on to the Internet in a big way: 61 per-
tends to make negotiation with the enemy, cent used it in this latest survey, compared
let alone the development of longer term with just 37 percent ii year earlier.
partnerships, inconceivable. For these, and many other, reasons, it
is clear that we now stand on the thresh-
MONKEY TRAPS old of a new era in the relationships be-
Such reactions bring to mind the old tween business and its many stakeholders,
“Monkey Trap” tale (Exhibit 1).Companies including potential new recruits. We also
like Freeport McMoRan would do well to see, in the words of a recent book on green
learn and understand it. The history of the activism in America, environmentalism at
environmental revolution is full of ex- the cros~roads.~ Faced with growing media
amples of companies locking themselves skepticism and a degree of political back-
into various forms of monkey trap. In the lash, environmentalists have been rethink-
case of Freeport McMoRan and RTZ, their ing what they do and how they do it.
corporate fists are locked in the earth by For business, the value of the multiple
the thought of the billion tonnes of copper perspectives introduced by stakeholder
and gold ore to be won as giant mechani- dialogue processes has been demonstrated
cal shovels chew away at the mountain time and again for companies. The priori-
tops. And the nature of human beings and ties and strategies emerging from such pro-

38 / Autumn 1998 / ENVIRONMENTAL [IUAUTY MANAGEMENT John Elkington


Exhibit 1. The Monkey Trap

A monkey comes into a village at night. He finds a hole in the ground and circles it warily, smelling food. His paw just

I barely fits into the opening, because the hole is actually a narrow-mouthed jug buried flush with the ground. He
manages to scoop up a handful of rice, but can‘t run off with the food-since his closed fist can’t be drawn back I

,
through the jar’s opening. Not wanting to lose the food, he screeches, but keeps his fist closed. Shortly, a villager
comes by with a rock or pole and kills the monkey, either as a pest or for food. * !
.. .
I
I

cesses turn out to be better-rooted in personality and high economic compe-


emerging realities, more credible with all tence.” He may or may not succeed but
stakeholders, and, as a result, more robust. jokes that, “I stand on my head day and
Not that this approach has been trouble- night figuring out how I can become Chan-
free: some of the information released by cellor.”5 Given enough time and the right
Novo Nordisk to visiting stakeholders breaks, some of these people will play key
turned up as part of a consumer campaign roles in the sustainability transition. Ex-
against the company’s enzymes in Ger- pect to see growing numbers of them pop- Faced with growing
many, Austria, and Switzerland. But that, ping up on company boards before long. media skepticism
the company believes, is part of the price As we shift towards the sustainable and a degree of
you pay to build the relationships which business paradigm, we will see companies political backlesh,
are likely to be indispensable during the like Freeport McMoRan and RTZ trying to environmentalists
sustainability transition. develop strategic partnerships with indi- have been rethinking
There is no question that these changes vidual campaigners and with major cam- what they do and
potentially represent a ‘‘lox”challenge for paigning groups. Some will succeed in how they do it.
environmentalists and the traditional style attracting powerful partners, some not. But
of relationship they have developed with the terms and conditions of these partner-
business. But it is still far from clear how ships will have changed profoundly. In the
many of today’s campaigning organiza- old order, very few campaigning groups, or
tions will successfully make the transition nongovernmental organizations (NGOs) as
to the new ways of operating. Equally, the they are better known, were prepared to
changing conditions will create opportuni- work directly with industry. Some never
ties for totally new forms of campaigning, will, but longer term they will probably turn
pressure politics, and partnerships between out to be in the minority. What is different
campaigners and like-minded corporations. today, however, is that the NGOs are increas-
Indeed, these initiatives may well be devel- ingly in a position of power-and some are
oped from scratch by some of the students preparing to use it in novel ways, working
covered in the European’s survey. with business and through markets.
Meanwhile, earlier generations of
green activists are moving into the main- TRAPPING NGO FISTS
stream. Take German politician Joschka In the old order, the NGOs that decided
Fischer, who at the time of this writing was to work with business generally wanted
leader of the Bundestag Greens. Because money and were considered to be sellouts
Fischer is determined that the Greens will by radical activists. Whether the funding
influence national, not just ecological, was for core costs, campaigns, or other ini-
policy, he gave himself a crash course in tiatives, the relationship was simple.
economics and began to speak out posi- Crudely stated, it was “Give us money and
tively on foreign policy issues like sending we will splash your name over some ap-
troops to Bosnia and European Monetary propriate surface.” A few leading NGOs,
Union. His aim is to lead the Greens into a particularly those dedicated to wildlife
left-center coalition “with an independent conservation, developed huge corporate

Partnerships from Cannibals with Forks: The Triple Bottom fine of2lst-Century Business ENVIRONMENTALQUALITY MANAGEMENT / Autumn 1998 / 39
sponsorship departments dedicated solely Greenfreeze and After
to hunting down deep-pocketed corporate Now we are entering a new phase in
donors. And, like the monkey with its fist the evolution of business-NGO relations,
in the trap, they too then tended to find involving early strategic alliances between
that they were in no position to run effec- companies and selected NGOs. In the pro-
tive campaigns against their newfound cess, some NGOs are learning to punch
funding partners. Some companies even with the weight of multinational corpora-
offered funding with the explicit aim of tions, in part by learning to work alongside
locking up potential enemies, or even of and through corporations. An early ex-
using them as Trojan horses. ample was the string of “strange alliances”
In any event, the conditions in which that Greenpeace pioneered in its “Green-
such partnerships were pursued changed freeze” campaign with companies like
dramatically when two things happened in DKK Scharfenstein and Calor.
parallel. First, companies, inevitably, be- The aim was to use Greenpeace’s mar-
came more discriminating. They began to keting and communication muscle to help
insist on a bigger PR bang for their spon- launch ozone-friendly technology, which
sorship buck. And they wanted their ben- the prevailing refrigeration industry consen-
efits in the form of an enhanced reputation sus said was unworkable. The result was
with selected audiences. As “cause-related that the plans of the Inultibillion-dollar re-
marketing” evolved, some of those NGO frigeration and chemical industries were
corporate sponsorship departments be- thrown into complete disarray.‘j What hap-
came almost indistinguishable from main- pens if and when Greenpeace starts to work
stream advertising or PR agencies. with the real heavyweights?
The second shift was driven by NGO In the world of business, environmen-
needs. They found themselves managing tal performance is increasingly seen as a
increasingly large projects and budgets. competitive and strategic issue for compa-
Their staffs mushroomed and demanded nies. As a result, growing numbers are ex-
better employment conditions. They found perimenting with novel forms of NGO rela-
they needed people, and project and finan- tionship. In the world of NGOs, meanwhile,
cial management skills which, they noted, the mid-1990s marked a critical crossroads,
business was also rich in. So we saw with the environmental agenda opening out
downsizing corrtpanies seconding manag- into a much broader, and more demanding,
ers to NGOs, often as a way of easing them sustainable development agenda. As a re-
into retirement. And we also saw NGOs sult, more environmental NGOs are experi-
appointing people from business to their menting with partnership approaches to
boards and top management posts. environmental and sustainability problems.
One pioneer has
In a parallel trend, we saw leading One pioneer has been the U.S. Envi-
been the U.S.
campaigners being recruited by major com- ronmental Defense Fund (EDF),which has
Environmental
panies. Not all of these transfers worked. worked with companies as diverse as
Defense Fund (EDF),
More than a few secondees, and some of McDonald’s and General Motors. Recently,
which has worked
those actively headhunted, proved to be it formed the Alliance for Environmental
with companies as
fish out of water. But enough of these grafts Innovation with the Pew Foundation-
diverse as
“took” to ensure that NGOs remain inter- and set u p a joint task force with S.C.
McDonalds and
ested in finding new ways to access the Johnson & Son, Inc., to work on the clean-
General Motors.
human resources and skills available ing products company’s product formula-
within their business partners-and that tion and packaging processes. “People
companies find ways to extract new forms have always expected products to be effec-
of value from campaigning organizations tive, while also being safe to use and dis-
or from ex-campaigners. pose [of],’’ explained Joseph Mallof, an SCJ

40 / Autumn 1998 / ENVIRONMENTAL QUAUTYMANAGEMENT John Elkington


executive vice president:’ gence process was already running, we all
found the results surprising.
We believe that our products can of- Rather than illustrating the gulf to be
fer higher quality and value to people bridged, the survey showed a surprisingly
if we integrate eco-efficiency as a fun- high degree of convergence. Despite what
damental part of the initial product some companies may believe, NGOs are
concept. This will enable us to use watching environmentally proactive compa-
more environmentally friendly mate- nies with great interest, and most are heart-
rials, and fewer of them, which in ened by the upsurge in corporate environ-
turn will reduce waste, risk and costs. mentalism. Interestingly, though, NGOs are
also acutely aware of the gap between
In the case of the EDF-S.C. Johnson leaders and laggards in a given industry.
partnership, each partner has borne its This knowledge is informing their selection
own costs, as did EDF in earlier projects of potential partners. We then went on to in-
with other companies. But other NGOs terview some 20 companies that had already
will be much less worried about accepting developed strategic alliances with NGOs,
the corporate dollar. Indeed, they will in- among their number, companies as di-
creasingly need to do so to fund the grow- verse as the Body Shop, General Motors,
ing scale of their operations. The ethical McDonald’s, and Monsanto. Indeed, the
debate on such issues is already fairly project unfolded against a background of
heated and, on present evidence, the tem- increasing collaboration between companies
perature is likely to rise further. and NGOs, among them WWF’s developing
link with IJnilever on “sustainable fisheries”
Strange Attractor (Exhibit 2).
So just how important are these trends? The inescapable conclusion is that as
Not just at the level of a company’s public the environmental agenda broadens to in-
affairs department, but at the level of the corporate sustainability’s triple bottom
board? The board of British Petroleum (BP) line, some NGOs are recognizing the key
wanted to have answers and SustainAbility role that business can, indeed must, play
was asked to investigate the growth of busi- in forging workable solutions. Increasingly,
ness-NGO alliances worldwide, with a view stakeholder capitalism will be the name of
to helping the company develop an agenda the game. Growing numbers of businesses
for actiomRRecently in the news because of are seeking to move beyond confrontation
alleged misdemeanors in Colombia, BP has to forge more productive relationships
a long track record of working productively with NGOs. The convergence of these
with NGOs. But the company’s board trends creates a n opportunity for new
wanted to know whether it should be think- forms of partnership but raises an interest-
ing in terms of developing a strategic alli- ing new issue. Many business people had
ance with one or more NGOs. And, if so, argued that there were too many NGOs for
with whom, how, and to do what? comfort. If current trends continue, how-
To this end, we surveyed more than 60 ever, we may well see a shortage of cred-
environment and development NGOs and ible NGOs willing and able to work along-
20 companies worldwide, asking them to side, and invest their credibility i n ,
assess the sincerity of corporate environ- particular companies or industry sectors.
mentalism, the most important influences Thus, we concluded, companies that lead
on environmental performance, and the their competitors in forging strategic alli-
elements which make for successful part- ances with key NGOs could enjoy a strong
nerships. We then analyzed the two groups “first mover” benefit.
separately. Although we knew a conver- Nor is this just a European and North

Partnerships from Cannibals with Forks: The Triple Bottom fine of 2lst-Century Business ENVIRONMENTALQUAUTYMANAGEMENT / Autumn 1998 / 41
Exhibit 2. Unilever, U.K./The Netherlands: Sustainable Fish Fingers

I As the world‘s largest fish buyer, the Anglo-Dutch giant Unilever is backing a plan developed by W W F to set up an
international labeling scheme for sustainable fish production. Unilever is the company behind such brands as Bird’s
I Eye and John West. When the scheme was announced in 1996, the plan was thatthe first labeled products would be
in the stores by 1998, with all of the company‘s fish products labelled by 2005.
The new standards, which will be policed by a new Marine Stewardship Council (MSC), will iocus on two main issues:
where the fish are caught and the methods used to catch them. Participating fisheries will be certified againstthe
MSC criteria and their packs will bearthe MSC logo. The project has been modeled on the Forest Stewardship Council
I (FSC), a similar program WWF set up in l993for the timber trade9 I
But what is perhaps most interesting about the scheme is that it reflects disillusion on the part of both WWF and
Unilever with government efforts to set and enforce catch quotas to control over-fishing. This is the first real attempt
I to offer a market-based approach. It remains to be seen, however, both whether the supermarkets and specialist fish ~

I stores will back the scheme, and whether consumers will switch in significant numbers to sustainable kippers and
fish fingers.
~ _ - _ _ .~ .~ -~
I
J

American phenomenon. Kespondents well managed, can fuel schizophrenia both


from around the world recognized the in companies and NC;Os.
trend. From southern Africa, Jon Hobbs (at Of course, it is difficult to generalize
the time, executive director of the Indus- about NGOs, given that they are so diverse.
trial Environmental Forum of Southern They concentrate on a wide array of envi-
Africa) observed: ronmental (and often social and economic)
issues; span local, regional, national, and
It is interesting that these questions international “jurisdictions”; represent
should be raised at this time. A recent numerous forms of decision-making struc-
series of interviews with our mem- ture and management: and are driven by
bers (mostly corporate executives) widely different political philosophies.
revealed that their priority require- Some NGOs are staffed by a handful of
ment from the [Indus- trial Environ- people, relying largely on volunteer efforts,
mental Forum] is “guidelines” on while others are large, international, highly
how to “better engage” NGOs. professionalized organizations. These in-
herent differences in form, agenda, and
Schizophrenia Guaranteed style also extend to their views on devel-
More than 85 percent of our NGO re- oping relationships with business, whether
spondents believed that partnerships will in true partnerships or in dialogs. So before
increase over the next five years, and that entering into an alliance with an NGO, a
NGOs should get involved in more com- company would want to know where the
pany partnerships. Even so, confrontation organization fits into the overall
is expected to continue in parallel-and sustainability movement.
several factors could reverse the trend to- To make the diversity easier to grasp,
ward collaboration. In the United States, we distinguish between four main types of
for example, Speaker Newt Gingrich and NGO, based on two separate sets of char-
his Republicans managed to trigger a ma- acteristics. First, consider the extent to
jor re-think among NGOs already working which the NGO seeks to integrate the role
with companies with their attempts to of businesses and “public interest” groups
undermine existing environmental regula- in achieving environmental goals. At one
tions. In the event, NGOs and their allies end of the spectrum, as Max Nicholson put
fought off the challenge, but both they and it a couple of decades ago, are the integra-
the companies they work with will need to tors, placing a high priority on developing
grapple with the internal “schizophrenia” productive relationships with business,
partnerships can create within their own and striving to identify non-confronta-
organizations. Partnerships, even when tional, “win-win” strategies. At the other

42 / Autumn 1998 / ENVIRONMENTALOUALITY MANAGEMEM John Elkington


end of this spectrum are the polarizers. thrive on bad news, so the natural selection
They have typically made a strategic deci- pressures working in favor of shark-like be-
sion not to develop close working relation- havior are often intense. On the other
ships with business, preferring to concen- hand, the NGO type likely to be most in de-
trate instead on a watchdog role. mand, both with business and public sec-
Second, consider whether the NGO tor organizations, is also among the rarest
discriminates among companies within an to date: those pursuing what Brain Tech-
industry with respect to their real or per- nologies Corp. has dubbed the “Strategy of
ceived environmental commitment and the Dolphin.”’” Our survey showed grow-
performance. At one end of this spectrum, ing numbers of NGOs moving--or aspiring
we have the discriminators. For them, the to move-towards this top, right hand cell.
challenge is to understand the issues fac- This is the “Strange Attractor” of our BP
ing a particular industry and to track the report’s title.
progress made by individual companies The drivers pushing u s in this direc-
compared to industry benchmarks. At the tion are summarized in Exhibit 4.The
other end of the spectrum, there are the re s u 1ti ng st r a n ge a 11i anc e s ” between

nondiscriminutors. For them, a company’s corporations and NGOs will demand ex-
relative environmental performance is not traordinary vision and new political and
of particular interest. Rather, the focus of management skills from people who in
attention is typically the environmental the past have found it much easier to
burden of the industry in general. simply lob bricks at one another. They
With these two dimensions in mind, are now being asked to build together. If
we use a four-celled matrix of NGO types the approach works, they will need to
(Exhibit 3) showing “Sharks,” “Orcas,” accept shared responsibility for both the
“Sea Lions,” and “Dolphins.” Most sane ends and the means. If they fail, as many
people and organizations tend to avoid experiments do, we need to recognize
sharks, although there are plenty of them that even some failures should be cel-
about in most industries. The infosphere, ebrated if, in the process, we learn from
in particular, is full of them: the media our mistakes.

Exhibit 3. Four Types of NGOs


r- ~~ __ -_ -~
1
I
Polarizer Integrator

I
I Discriminator Orca (killer whale) Dolphin
highly intelligent, strategic intelligent, creative, integrators
can adapt behavior, strategy to context adapts behavior and strategies to context
fearsome, uses fear to coerce can fend off sharks
uncertain in behavior equally comfortable in deep or shallow waters
likes deep water, can cover great distances
associates with own kind
eats sea lions (and, sometimes, dolphins)
. can cover great distances
can be a loner - or intensely social
empathy for other species

, Non-discriminator Shark Sea Lion


relatively low intelligence moderate intelligence
tactical tactical
acutely responsive to distress popular spectacle
poor eyesight, peripheral vision of prey -friendly
nondiscriminating in terms of targets menu item for sharks and orca
swims, often attacks in packs tends to stay in “safe waters”
believes in safety in numbers
uneasy if too far from group
.

Source: SustainAbility

Partnerships from Cannibals with Forks: The 7@/e Boftom Line of2lsf-Century Business ENVIRONMENTAL QUAUTY MANAGEMENT / Autumn 1998 / 43
Exhibit 4. Drivers of “Strange Alliances“
-_- ~ - ~ _ _ _ _ _ - __ _- _____ ~~~-

Company Perspective NGO Perspective

markets are pushing us this way markets are interesting


NGOs are credible with public on, for example, issues, priorities disenchanted with government as provider of
need for external challenge solution
cross-fertilization of thinking need for more resources, such as funding and
greater efficiency in resource allocation technical and management expertise
desire to head off negative public confrontations, business is credible with, for example,
protect image and reputation government
desire to engage stakeholders cross-fertilization of thinking
access to, for example, supply chains
greater leverage

Source: SustainAbility

WHAT’S NEW, GURUS?: A QUESTION OF ing principles in commerce as well as


COMMITMENT in society.
Interestingly, some far-sighted manage-
ment gurus have been flagging up similar Business leaders do not typically
trends in other areas. Among the ideas they see loyalty, whether with suppliers, cus-
are advancing are business ecosystems, co- tomers, or other stakeholders, as fashion-
opetition, and stakeholder capitalism. able, lucrative, or even particularly rel-
James Moore’s book The Death of Compe- evant. Their view is that “they have
tition” introduced the notion of business more urgent problems to worry about-
ecosystems. The challenge for companies for example, growth, productivity, and
today is to work out how to integrate a profits.” No one disputes that these pri-
growing range of partners and stakehold- orities are indeed urgent, but the inter-
ers into these ecosystems. esting thing about Reichheld’s work is
The advantages of this approach have that he argues that many of the indica-
also been explored by Fred Reichheld in two tors of growth, productivity, and profit-
recent books: The Loyalty Effect and The ability seem to signal that the wrong
Questfor But as Reichheld himself approach is being used. As Reichheld
argues: “Loyalty seems to be dying in our explains, “ignoring loyalty in order to
society. Look at the way we treat friendships, focus on these ‘more pressing’ problems
community organizations, even marriage. may be exactly the wrong fix.”
You would think we were renting cars or In short, he argues, what is dead is the
motel rooms instead of making commit- old form of unconditional loyalty. Fifty
ments.” And, he points out, “it’snot just our years ago, he suggests,
social lives that seem to be less permanent.
As the Financial Times pointed out recently, loyalty played a much larger part in
business too seems to have entered the age everyday life than it does today. People
of the one-night stand.” The average IJ S . were deeply loyal to their families, of
company, he notes, course. But people also displayed un-
questioning loyalty to a long list of
now loses half its customers in five civic, religious, and professional au-
years, half its employees in four, and thorities and even to the companies
half its investors in less than one. they bought from and worked for.
Layoffs, stock-market churn, fickle
customers, executive job surfing-all As a result, in today’s world “very few
signs seem to point towards oppor- of us feel unconditional loyalty to anyone
tunism and disloyalty as the govern- or anything.” But don’t despair. Reichheld

44 / Autumn 1998 / ENVIRONMENTALQUALITYMANAGEMENT John Elkington


concludes that unconditional, hierarchical game theory to work out ways of avoiding
loyalty has simply been replaced, and not “lose-lose” and “lose-win” outcomes,
with a vacuum. “Free markets have re- where everyone loses or you set up the pie
placed it with something far superior- in such a way that only other people win,
mutual, earned loyalty; loyalty that works and instead pursue “win-win” outcomes.
in two directions.” There is no reason at all why the same
In the new order, it turns out, stake- principles cannot be pursued in relation to
holders, whether they are customers, em- the “win-win-win” outcomes required by
ployees, or triple bottom line campaigners, sustainability’s triple bottom line.
want to be (and to be treated as) partners. So if business is viewed as a game,
In fact, the same “zero defection” targets who should we include as key players?
that Reichheld proposes for companies The answer is customers, suppliers, com-
wanting to be “loyalty leaders” can be petitors, and complementors-those who
cross-applied to broader stakeholder rela- provide complementary products, services, In the new order, it
tionships. Companies may not be able to or other inputs. “Thinking complements is turns out,
keep their customers, employees, or triple a different way of thinking about business,”
stakeholders,
bottom line stakeholders forever, but the Nalebuff and Brandenburger contend: whether they are
greater the mutual, earned respect and loy- customers,
alty the greater is the chance that the orga- It’s about finding ways to make the employees, or triple
nization will be sustainable. pie bigger rather than fighting with bottom line
competitors over a fixed pie. To ben-
campaigners, want to
Co-opetition efit from this insight, think about how
be (and to be treated
When Harry Nalebuff and Adam to expand the pie by developing new as) partners.
Brandenburger chose “Business is War” as complements or making existing
the first phrase in their book Co-opetition, complements more affordable.
their intent was to skewer this notion.I3
They accept that the traditional language Co-opetition offers a number of rules
of business certainly makes it sound as for companies and stakeholders choosing
though business is war: “outsmarting the to travel this path. Simply stated, they are
competition, capturing market share, mak- as follows:
ing a killing, fighting brands, beating up
suppliers, locking up customers. Under Every player should be aware of tho
business-as-war, there are the victors and potential added value they bring to tht:
the vanquished.” But anyone involved in game. How will the game be different
business today knows that often it just isn’t if you are in rather than out?
like that. “You have to listen to customers, There needs to be at least a basic set of
work with suppliers, creato teams, estab- rules. Often, to build trust, these rules
lish strategic partnerships-even with need to be spelled out and agreed early
competitors. That doesn’t sound like war.” on.
As they explain, the real business Perceptions need to be taken into ac-
world often involves cooperation when count: different people view the world
creating a pie and competition when i t differently. The way we see the game,
comes to dividing it up. It’s not Tolstoy, and the way we think others see the
with endless cycles of war followed by game, influences the moves we make.
peace followed by war. “It’s simulta- There need to be boundaries: a game
neously war and peace.” Or as Novel1 without boundaries gctts too complex
founder Ray Noorda put it: ‘you have to to analyze or play. Players need to
compete anti cooperate at the same time.” agree on what those boundaries are or
Nalebuff and Brandenburger then use should be.

Partnerships from Cannibals with forks. The Trple Bottom Line ofZlst-Century Business ENVIRONMENTALQUALITYMANAGEMENT / Autumn 1998 / 45
Attention needs to be paid to different that the Cold War is considered to be over,
types of rationality and irrationality. In Trust concludes that the most important
any game, different players can be per- issue facing Europe, the United States and
fectly rational but, seeing the value other industrial democracies is economic
added, rules, and boundaries in differ- competitiveness. And here Fukuyama of-
ent ways, end up playing in very dif- fers a chilling conclusion: the tendency of
ferent ways. countries like the United States and Great
Britain towards individualism will under-
In sustainability partnerships, as in all mine their economies. By contrast, he ar-
other walks of life, dismissing actual or gues, the success of the rapidly growing
pot.entia1players as “irrational” closes the economies of East Asia is rooted in often
mind. It makes much more sense to expand overlooked forms of social capital, such as
the mind by trying to work out how others trust, sense of community, and social inte-
see the world, the game, and its rules. “To grat ion.
us,” say Nalebuff and Brandenburger, Fukuyama is hardly alone in making
this case: The Economist pointed out that
the issue of whether people are ratio- “hardly an issue of the Iiarvard Business
nal or irrational is largely beside the Review or the California Management Re-
point. More important is remember- view appears without the word ‘trust’embla-
ing to look at a game from multiple zoned on the cover.” One key reason for this
perspectives-your own and that of is that many current trends in management,
every other player. This simple- among them downsizing, reengineering. and
sounding idea is possibly the most the culling of middle managers, are forcing
profound insight of game theory. companies to place more responsibility on,
and faith in, their front-line employees.
It is also one of the simplest, yet most Now, growing numbers of companies are
effective ingredients in the expanded finding that this internal need for trust is
stakeholder approach to capitalism. mirrored in the external world. Just as they
need to work much more closely with
Trust smaller numbers of trusted suppliers, so
Every now and then you come across they also feel the need to involve a growing
In conventional a book that you can feel changing your range of external stakeholders, including
business terms, trust thinking as you turn each and every page. sustainability campaigners, in setting their
cuts the costs and Francis Fukuyama’s T r ~ s t , ’which
~ I read business priorities.
delays involved in on a flight to South Africa, had this effect In conventional business terms, trust
project development on me. Best known for his 1992 best-seller cuts the costs and delays involved in
and other processes. T h e End of History and the Last Man, project development and other processes.
Fukuyama (formerly deputy secretary of It can help to secure a licence to operate.
the U.S. State Department’s policy plan- But as environmental, and other triple
ning staff, then a Rand Corporation ana- bottom line factors increasingly shape
lyst) subsequently turned his attention to markets, the growth of trust between indi-
an area likely to be central to the sus- vidual companies and their stakeholders
tainable development agenda: trust-and will also help hone competitive edge and
what he describes as “social capital.” provide an important source of new busi-
With capitalism increasingly in the ness ideas. But companies investing in
ascendant around the world, The End of trust will still need to cultivate a degree of
History argued that different countries paranoia (in the sense in which Intel’s
were coming to share increasingly similar Andy Grove uses the word) and schizo-
political and economic institutions. Now phrenia (as discussed above).

46 / Autumn 1998 / ENVIRONMENTAL QUALITYMANAGEMENT John Elkington


BOARDROOM VIEWS: DAMN IT, THIS IS puff, and to convince themselves that
IMPORTANT this wasn’t a fluffy issue-and that
Most company directors are fairly com- we ought to be engaged in it.
fortable with the idea of commercial partner-
ships and many accept the need for social The Monsanto people came away
and community partnerships. But environ- “emotionally fired up,” says Shapiro. “It
mental and sustainability part-neringis still wasn’t just a matter of ‘Okay,you threw me
way down the curve. Environmentalists, in an interesting business problem, I have
particular, are often seen as a form of virus done the analysis, here is the answer, and
which should be kept as far away as possible now can I go back to work.’ People came
from the vital organs of a company or indus- away saying, ‘Damn it, we’ve got to get
try. That view will change. going on this. This is important.’ ”
A small but growing number of CEOs Experience suggests that such out-
and other business leaders are waking up comes are much more likely when compa-
to the need to involve even some of their nies bring the outside world in. Indeed,
fiercest critics in the process of deciding wherever we look, business is learning to Indeed, wherever we
what their companies should do next. Lis- listen to and consult with new types of look, business is
ten to Monsanto CEO Bob Shapiro: stakeholders. As Cor Herkstroter of Shell learning to listen to
put it in the wake of the Brent Spar and and consult with
We have to reduce-and ultimately Nigerian controversies, new types of
eliminate -the negative impacts we stakeholders.
have on the world. But even if Naturally we have listened very
Monsanto reached its goal of zero closely to our customers. We have lis-
impact next Tuesday, that wouldn’t tened very carefully to government
solve the world’s problems. Several and to our staff. They, after all, were
years ago, I sensed that there was the institutions, the bodies, we had
something more required of us than always dealt with. Of course, we also
doing no harm, but I couldn’t articu- dealt with environmentalist groups,
late what it was.” l5 consumer groups and so on, but we
tended to let the public affairs depart-
So Shapiro pulled together a group of ment deal with them. They were im-
about 25 critical thinkers, including some portant-but they were not as impor-
of the company’s up-and-coming leaders, tant as government, industry
and sent them off to ponder the issues with organizations and so on.16
a number of nontraditional thinkers, in-
cluding Paul Hawken, from the outside That, at least, was the prevailing wis-
world. In short, this was a very focused dom, but these controversies signalled an
form of partnership. “That off-site meeting important shift in triple bottom line poli-
in 1994 led to an emerging insight that we tics. “In essence,” Herkstroter admits, “we
couldn’t ignore the changing global envi- were somewhat slow in understanding that
ronmental conditions,” recalls Shapiro: these groups were tending to acquire au-
thority. Meanwhile, those institutions we
The focus around sustainable devel- were used to dealing with were tending to
opment became obvious. I should lose authority. We underestimated the ex-
have been able to come up with that tent of these changes-we failed to engage
in about 1 5 minutes. But it took a in a serious dialogue with these new
group of very good people quite a groups.” The key message: “We learnt we
while to think it through, to deter- had to be much more open to the world
mine what was real and what was just around us.” l 7

Partnerships from Cannibals with Forks: The Triple Bottom Line ofZlst-Century Business ENVIRONMENTALQUALITYMANAGEMENT / Autumn 1998 / 47
BUBBLING UNDER: GOING DUTCH the covenant creates a wider base of
Sustainability partnerships can be initi- support from within industry. If the
ated-and led-by government agencies, government tried to reach the same
Sustainability companies, NGOs, or other stakeholders. goals through legislation, it would be
partnerships can be One government-led partnership approach time-consuming and not necessarily
initiated-and led- which certainly ought to spread is based on very effective. Through voluntary
by government “covenants,” or voluntary environmental agreement it is possible to do difficult
agencies, companies, agreements between business and govern- things that could not easily be laid
NGOs, or other ment. Indeed, although the idea may be dif- down in law.
stakeholders. ficult to export in its entirety, it has attracted
interest from a number of other countries This approach, it hardly needs saying,
including Germany and Italy in Europe and, is not applicable to all problems and all
in the Americas, Argentina and the United circumstances. To work, it not only re-
States.I8Rooted in the Dutch political and quires sectoral bodies with the ability to
business tradition of consensus and consul- negotiate agreements with governments,
tation, the approach also benefits from the but also governments where the funda-
fact that Dutch companies tend to belong to mental policies and targets are not changed
one or more sectoral organizations-making with every new administration. Above all,
it easier to negotiate sector-wide agreements voluntary agreements will always require
with government. the pre-existence of a reasonably compre-
Since the first experiments of the hensive and sophisticated framework of
198Os, more than 75 environmental cov- legislation, to ensure that any “free-riders”
enants have been signed. These have com- are identified and dealt with.
mitted a wide range of sectors to meeting
targets in such areas as energy efficiency, Eco-Infrastructure
greenhouse gas reduction, and the control One emerging recognition is that, how-
of volatile organic compounds. So, for ex- ever much a single company may be able
ample, some 150 companies operating in to do on the eco-efficiency front, in the end
the surface treatment sector signed up to an sustainability will depend on the progress
energy efficiency covenant with the eco- of entire concentrations of industry, com-
nomic affairs ministry which aimed for a plete value chains, and whole economies.
20 percent improvement between 1989 As a result, we see growing interest in the
and 2000. And the approach, despite some provision of eco-infrastructure, as for ex-
NGO criticisms, appears to be making ample in the concept of the eco-industrial
headway. When the chemicals covenant park (EIP). The central idea here is that by
was reviewed, it turned out that 107 out of sharing resources, whether in the form of
125 companies committed to the agree- efficient energy production or of state of-
ment had already installed the manage- the-art waste management, companies can
ment systems needed to monitor progress. significantly boost the overall eco-effi-
The main criticisms have been that the ciency of a local or regional economy.
covenants do not go far enough and, because “We see eco-parks as a community of
they tend to be based on intimate discus- companies working together to improve
sions between government and a particular individual and group performance in all
sector, they are not as democratic as the tra- environmental areas,” explained the 1J.S.
ditional legislative processes. But there are Environmental Protection Agency (EPA):
also real advantages. As KPMG partner
George Molenkamp put it, There is a large menu of options for
doing this, including energy efficiency
From the government’s point of view, in building and process design, inno-

48 / Autumn 1998 / ENVIRONMENTAL QUALITYMANAGEMENT John Elkington


vations in park infrastructure, created in a pristine valley on the edge of town,
wetlands to process stormwater, and and one-which is planned to have zero
shared environmental management emission manufacturing facilities-in the
services. Most of these options trans- south central business district. Such
late into bottom line benefits to the schemes will depend for their success on
companies. long-sighted regulators, communities, and
companies, but they certainly look like an
Of course, as Tomorrow‘s U S . editor, idea whose time is coming.
Carl Frankel, put it,
Industrial Ecology
There are many unknowns to con- Nor are these eco-industrial parks de-
tend with, Example: sooner or later a veloping in a vacuum. Behind them stands Nor are these eco-
critical player in a multi-company a rapidly-evolving field of research and industrial parks
waste recycling system will re-locate practice known as “industrial ecology.” developing in a
or go bankrupt. When that occurs, Whether the focus is on designing and vacuum,
how do you keep the entire system operating cities, ElPs, or individual com-
from collapsing? More immediately, panies, the idea is “based upon a straight-
how do you reassure potential EIP forward analogy with natural ecological
participants that there isn’t a fatal systems,” as Robert Frosch put it, “where
design flaw? Another problem in- nothing that contains available energy or
volves the difficulty of quantifying useful materials is
the economic and environmental But evidence that the approach does
benefits of EIPs for candidate compa- work can be seen every day of the working
nies. The bottom line is that full-scale week around the “industrial symbiosis” in
EIPs are still essentially untested. Kalundborg, Denmark. The scale of the
environmental benefits has been consider-
For participating companies, it also able. By 1995, $60 million had been in-
potentially adds one more level of uncer- vested by the participating companies and
tainty, particularly if they come to depend organizations to launch 16 materials and
on the outputs of others nearby. energy exchange schemes, which were al-
In The Netherlands, meanwhile, there ready producing $10 million a year in sur-
are plans for developing an “Environmen- plus.2oAlthough none of the cooperative
tal Technology Valley,” based on the Sili- initiatives had been required by legisla-
con Valley model and including at least tion, annual oil consumption had been cut
one business park catering to up-and-com- by 45,000 tonnes, coal consumption by
ing eco-companies. And a series of pro- 15,000 tonnes, and water consumption by
posed schemes have been surfacing across 600,000 cubic meters. In addition, carbon
the United States. The President’s Council dioxide and sulfur dioxide emissions had
on Sustainable Development strongly been cut, respectively, by 175,000 tonnes
backed EIPs and anyone wanting to keep and 10,200 tonnes a year.
a finger on the EIP pulse should keep an It is no surprise that ecosystems think-
eye on Chattanooga, Tennessee. Since the ing is now coming into management con-
late 1980s, according to councillor David sulting: as any ecologist knows, the output
Crockett (a descendant of the legendary of one organism becomes input for others,
pioneer), the city has aimed to be a “living and organisms may both compete and co-
laboratory” for sustainability policies, operate. Among the names of interesting
technologies, and design. Four EIPS are in thinkers that have popped up in the area
the works, a couple on old “brownfield” of industrial ecology and metabolism are
industrial sites, one on a “green field” site Brad Allenby, Bob Ayres, and Hardin

Partnerships from Cannibals with Forks: The Triple Bottom Line of Zlst-Century Business ENVIRONMENTALQUALITY MANAGEMENT / Autumn 1998 / 49
Tibbs, but the field is now wide open for cern; and leverage partnerships, whose aim
its own version of such entrepreneurs as is to find win-win (or win-win-win) oppor-
Steve Jobs or Richard Branson to get it on tunities that will allow each party to make
the road commercially. modest investments in return for relatively
high gains.21The rules of the game will
WINNERS, LOSERS: ARE you IN OR OUT? clearly vary depending on the style of part-
Winners, whether they are companies nership adopted.
or national or regional economies, will Most companies developing advanced
learn how to earn the loyalty of their key eco-efficiency and sustainability manage-
stakeholders (Exhibit 5). Success in these ment tools recognize that they need a mul-
areas will help considerably with such tiplicity of inputs to the relevant processes
challenges as building employee morale if they are to provide robust sugges tions for
and generating new business ideas. Com- future product development and marketing.
panies with active, extended webs of part- But they also need to recognize that adopt-
ners will be much better prepared for ing the right tools and developing the rel-
emerging trends, their antennae scanning evant management systems are only part of
horizons well beyond the reach of many of the challenge. If they need to build public
their competitors. credibility and stakeholder engagement,and
Note that the rules of partnership will most companies do, they need to build
change as the partnerships evolve. The wider partnerships-so that their stakehold-
Management Institute for Environment ers share a sense of ownership in the ap-
and Business (MEB)has reviewed the evo- proaches adopted. Given that different part-
lution of environmental partnerships in ners will bring different rationalities to the
the United States, and defines four differ- table, however, learning how to sustain
ent types of partnership. These are: pre- these partnerships will be a tough challenge.
emptive or resolution partnerships, which One outside possibility is that the unions-
are designed to defuse an already or poten- increasingly marginalized during much of
tially hostile situation; coalescing partner- the 1980s and 1990s+:ould find a new role
ships, in which rivals join forces to accom- as far-sighted brokers in relation to triple
plish their goals; exploration partner- bottom line resources and performance.
ships, based on opportunistic attempts to The losers, often, will be those left out
research or investigate issues of joint con- of the really significant sustainability part-

Exhibit 5. Nortel, Canada: Shared Savings

Suppliers usually do best when they maximize their sales to customers. Often, however, the result is that both the
customer and the environment turn out to be losers. Now the telecommunications company Nortel is testing the
!
\
"shared savings" approach to chemicals use reduction in Canada and waste minimization in Britain?* The company,
which is active in some 90 countries, employs more than 60,000 people, and had a turnover of $10.7 billion in 1995,
launched a Product Life Cycle Management program in 1992 designed to root out inefficiencies.
Partnerships with suppliers are seen to be fundamental to both commercial and environmental success. Nortel's
shared savings approach focuses on the relationship between supplier and customer. This is structured so as to
i
I
provide both with financial incentives to improve their environmental performance, for example by curbing resource
consumption and waste generation. The new approach is badly needed: recent trends in Nortel's resource efficiency
I
had been moving in the wrong direction.
In 1993, the company disposed of 8,851 tons of solid waste to landfill in the British Isles. Its target has been to cut
this figure by 50 percent by 2000, but by 1996 landfill disposals had jumped by 80 percent to 15,892 tonnes. Part of the
problem had been better reporting, but the pressure is now on to cut waste arisings dramatically. Interestingly,
however, the company found it hard to find suppliers able to meet its new needs. The waste industry proved to have
little experience of shared savings contracts, but as growing numbers of customer companies move in this direction,
suppliers and contractors will have no option but to work out new ways of partnering with customers to boost
efficiency-both in cost and environmental terms.
i

50 / Autumn 1998 / ENVIRONMENTALQUALITY MANAGEMENT John Elkington


nerships. Sometimes this will be a result NOTES
1. David Watts, "Kidnappings Help to Undermine Gold- Dig-
of the company's perceived failures in the gers from the West," The Times, May 17,1996.
past, sometimes it may itself be a cause of 2. Marieke Favrod, "Monkey Trap," Adbusters, Spring 1996.
subsequent business failure. But one thing 3. Tom Patey, "Graduates Focus on Green Issues and Multi-
can be guaranteed: no company, industrial nationals," European, May 16,1996. The European Gradu-
ate Survey 1996 is available from Universum, Box 7053,
sector, or national economy will succeed 103 86 Stockholm, Sweden, or call t46 8 679 48 00.
in defining and meeting its triple bottom 4. Jonathan Adler, Environmentalism at the Crossroads:
line responsibilities and targets without Green Activism in America, Washington, D.C.: Capital Re-
search Center, 1996.
developing much more extensive stake-
5. "10 [Germans] Who Make a Difference," Time, Septem-
holder relationships and partnerships ber 30,1996.
than would have been the case even in the 6. Ed Ayres and Hilary French, "The Refrigerator Revolution."
recent past. World Watch, SeptemberlOctober 1996.
7. Martin Wright, "Task Force First," Tomorrow.
THREE KEYS TO THE 21ST CENTURY 8. John Elkington and Shelly Fennell, "Shark, Sea Lion or Dol-
phin?," Tomorrow, March-April 1997.
The fifth sustainability revolution fo- 9. "Unilever and WWF Lay Path to 'Sustainable Fish' Logo,"
cuses on partnerships, requiring that we ENDSReportZN, March 1996.
understand and use the following keys to 10 Dudley Lynch and Paul L Kordis, Strategyofthe Dolphin:
Winning Elegantly by Coping Powerfully in a World of Tur-
sustainable enterprise: bulent Change, U.K.: Arrow Books,1990.
11. James Moore, The Death of Competition, New York:
The role of complementors arid of part- Harperbusiness, 1997.
nerships will be crucially important 12. Frederick F. Reichheld, The Loyalty Effect: The Hidden
Forces Behind Growth, Profits and Lasting Value, Boston,
both in the development of the global Mass.: Harvard Business School Press, 1996. Frederick F.
sustainability agenda and of the triple Reichheld, The Quest for Loyalty: Creating Value through
Partnership, Boston, Mass.: Harvard Business School
bottom line strategies of particular Press, 1996.
companies and entire industry sectors. 13. Barry J. Nalebuff and Adam M. Brandenburger, Co-
More and more, companies and NGOs opetition, New York: HarperCollins, 1996.
will be drawn towards government- 14. Francis Fukuyama, Trust: The Social Virtues and the Cre-
ation of Prosperity, New York: Hamish Hamilton (Viking
industry-NGO symbioses. Penguin), 1995.
Earned loyalty is the wave of the future. 15. Joan Magretta, "Growth through Global Sustainability: An
Companies must be prepared to be chal- Interview with Monsanto's CEO, Robert B. Shapiro,"
Harvard Business Review, January-February 1997.
lenged in depth by potential and current
16. C. A. J. Herkstroter, Dealing with Contradictory Expecta-
complementors and partners. These tions: The Dilemmas Facing Multinationals, Octoberll,
challenges will be a key part of the value 1996, Amsterdam.
of such relationships. And the choice of 17. Andrew Lorenz, "Streamlined Shell Powers Head," Fi-
nancial Times, May 26,1996.
partners, as in every other area of human 18. Ronald van de Krol, "Partners in Grime," Financial k e s ,
life, will be critical. May 1,1996.
Building trust represents one of the 19. Robert A. Frosch, "Industrial Ecology: A Philosophical In-
troduction," Proceedings ofthe National AcademyofSci-
most vital investments we can make in ence 89February 19921, pp. 800-803.
social capital creation. Remember, 20. Panagiotis Karamanos, "Industrial Ecology: New Oppor-
however, that poorly constructed rela- tunities for the Private Sector," lndustry andEnvironment
1814). United Nations Environment Programme, October-
tionships may well turn into "monkey December 1495.
traps," constraining the ability of one 21. Matthew Arnold and Dirk Long, The PowerofEnvironmen-
or more partners to do the things they talfaflnerships, Fort Worth,Texas:The Dryden Press, 1994.
are in business to do-and undermin- 22. "Nortel: Shared Savingsfor Chemicals and Waste Reduc-
tion,'' ENDSReport267, April 1997.
ing trust.

~~ ~

John Elkington is chairman of strategy consultants SustainAbility and the author of global bestsellers The Green
Consumer Guide and The Green Capitalists.

Partnerships from Cannibals with Forks. The Fiiple Bottom line ofZlst-Century Business ENVIRONMENTALQUALITY MANAGEMENT / Autumn 1998 / 51

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